Baillieu tough on crime but soft on Ararat fines

Royce Millar

ANXIETY about having enough prison beds to cater for its tough law-and-order agenda appears to have been a factor in the Baillieu government failing to enforce penalty payments when the troubled group building a new Ararat prison failed to meet its first key deadline in January.

The Age has confirmed that in December the government struck a deal with the Aegis consortium under which a January deadline for stage one of the $400 million prison was extended and penalties deferred.

Such a deal was in contrast to the government's hardline position on the similarly struggling desalination project at Wonthaggi where it pointedly refused to relax deadlines.

Both projects were commissioned by the Brumby Labor government. But whereas Victoria is not in need of desal water, the Coalition's tough-on-crime policies will inevitably lead to pressure on the state's already cramped prisons.

The Ararat scheme could not be salvaged before project builders St Hilliers and the New Zealand-based Hawkins ran into serious financial trouble and work ground to a complete halt in May.

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Last night, the government refused to confirm the December agreement or discuss the January deadline and penalties that may have applied to it, claiming all such detail as ''commercial in confidence''.

A further ''standstill'' agreement was struck in May under which penalties would be further deferred while the government and Aegis consortium sought to negotiate a new way forward.

That agreement expires tomorrow, and with the political heat rising over Ararat, the government's patience is running out.

Mr Baillieu has given Aegis until tomorrow to propose an acceptable solution that meets conditions including the immediate payment of millions of dollars in outstanding fees to building contractors.

The Age believes the government is close to a deal that would allow the existing consortium - or part thereof - to complete the Ararat job, which includes refurbishment of an existing jail and the addition of a new facility, with new builders.

Mr Baillieu has repeatedly indicated the government would not contribute more than the $394 million (net present cost) earmarked for construction and management of the facility over 25 years.

Commonwealth Bank, on behalf of the consortium, has pressed hard for more concessions, including the further extension of deadlines and the bringing forward of government payments not due until construction is complete.

Such concessions will be hard to justify given the government's refusal to budge on similar requests by the Aquasure group developing the much larger desalination plant.

If Commonwealth Bank's proposal does not meet these conditions, the government will almost certainly terminate the Ararat contract, making it the first public-private partnership to have completely failed in Victoria.

The Brumby-era project has become a major headache for the government with out-of-pocket contractors, the local Ararat business community, the council, and building unions calling in unison for the government to intervene and ensure the project restarts.

Electrical Trades Union assistant secretary Troy Gray said that, with the project already so delayed, it was inevitable the government would have to intervene and contribute more.

''The longer Ted Baillieu keeps his head in the sand and doesn't take action, the more it will cost the Victorian taxpayer,'' said Mr Gray.

Government spokesman James Talia said: ''The Ararat prison project was a project entered into by the former Labor government and, like many other infrastructure projects, has been beset by problems which the Coalition is now left to clean up.''